Tory plan to cut spending to 1930s level are unfair, economically illiterate and will lead to 'shrunken, shrivelled public services'

Tory plans to cut spending back to 1930s levels are ideologically driven and will leave public services 'shrunken and shrivelled', Lib Dem Treasury minister Danny Alexander has claimed.

In his strongest attack on Conservative Chancellor George Osborne, who he has spent four years working with, Mr Alexander claimed plans to balance the books entirely through cuts were unfair and 'economically incredible'.

Lib Dem Treasury minister Danny Alexander told MailOnline he relishes going head-to-head with his Tory boss George Osborne about why he wants to cut spending year after year after year'

Mr Alexander told MailOnline he relished going head to head with his Tory boss in TV election debates about why he wants to cut public services 'year after year after year' even after the deficit has been tackled.

Asked if he had signed up to cutting the state back to 1930s levels, Mr Alexander replied: 'No. There are big differences between us and Labour and us and the Conservatives.'

Plunging it further into the sort of shrunken shrivelled public services that the Tories would imply, I just think that is totally wrong

The Office for Budget Responsibility has warned that cutting spending under the plans set out at the Autumn Statement will see the state shrink to 35 per cent of the economy, the lowest 'since the late 1930s'.

Mr Alexander suggested the figure could be 2 or 3 per cent higher, in line with the historic average and worth billions of pounds for public services.

'I don't start from the point of let's name the size of the state. I start from the point of view of let's do what needs to be done to finish the job.

In the 2017-18 financial year… public expenditure is about 37.5 to 38 per cent of GDP which is broadly speaking the historic average.

'From that point on you say expenditure should grow as the economy grows, so it stays around that level.

'I think plunging it further into the sort of shrunken shrivelled public services that the Tories would imply, I just think that is totally wrong.'

Some have seen it as a reward for Mr Alexander for his loyalty to the Deputy Prime Minister, after Mr Cable was caught up in an abortive plot to oust him as leader.

Mr Cable's close friend and ally Lord Oakeshott was bankrolling a series of polls designed to prove the Lib Dems were doomed with him still as leader.

Mr Alexander laughed: 'I'm not aware of anyone being involved in any such things.'

But he is adamant that it is right that he will speak for the Lib Dems on Treasury matters. 'I've been the Liberal Democrat minister in the Treasury for all but 17 days of this Parliament. I'm the longest serving Liberal minister in the Treasury since Lloyd George.

'Nick's decision was based entirely on horses for course. I am the Liberal Democrat Treasury minister therefore I speak for the Liberal Democrats on treasury and economic issues.

'That's what I will be doing, it's what I have been doing for the last four and a half years.

'Vince has been Business Secretary, has done a damn fine job and should speak on those issues.'

It means Mr Alexander will have to go head-to-head with the Chancellor, with whom he has worked closely for almost five years.

'I relish the prospect,' Mr Alexander insisted. 'It's clear that David Cameron is trying to weasel out of the leaders debates with various excuses.

'I hope that George Osborne and Ed Balls will confirm they a willing to engage in Chancellors debates whatever the format.

'I would hate to think that either of them would try and run away from something that has been actually longer established than the party leader's debates.'

The Lib Dems argue the deficit should be dealt with through 80 per cent spending cuts and 20 per cent tax rises.

'We would borrow less than Labour, we would cut less than the Tories.'

Mr Alexander backed two more years of spending cuts, until 2017-18 when the structural deficit will have been eradicated.

'I would say that's the point at which the country can turn a corner. We have dealt with the deficit problem, and then you can get public spending back on to a more normal footing.

'The Tories would say keep cutting for year after year after year beyond that.'

He warned that this would mean deep cuts to the schools budget, which the Conservatives have so far refused to protect.

'Education would be in their firing line. I think that has got to be absolutely sacrosanct because that's about the future of our country.'

The NHS has become a major poilitical battleground, with Labour claiming the Tory plans would put the future of the health service in jeopardy.

The Conservatives have promised real terms increases in the NHS budget, but on its own this is unlikely to deliver the billions needed to deal with an ageing population.

'I think it's not clear what the Tory plans are,' Mr Alexander said.

'The Tory plans for massive unnecessary cuts, unfounded tax cuts are economically incredible. I think they are just not something that you could do.

'I know that either a Labour government or a Tory government what they do add up to is economic chaos for Britain.'

He said it was 'alarming' that having 'worked out a formula' for tackling the deficit, only the Lib Dems 'want to continue down this road'.

He added: 'The Conservatives want to veer off in one direction, which is cutting way further than is necessary, doing so I think for ideological reasons, shrinking the state beyond what is necessary.

'And also in an unfair way - they don't want to ask the wealthy to make any contribution, they want the burden to all be placed on spending cuts. Whereas we say the best off should make a contribution thorough the tax system.'

A Conservative source hit back at Mr Alexander's criticism: 'The latest forecast from the independent OBR shows that our plans would reduce total government spending as a share of GDP from around 40per cent today to 35.2 per cent by the end of the next Parliament in 2020.

'But that is very similar to the 35.9 per cent of GDP spent by Gordon Brown in the year 2000 – when Ed Miliband and Ed Balls were in the Treasury - frankly it's a bit worrying that the Chief Secretary doesn't understand this.

'What the Lib Dems and Labour also fail to understand is that to have strong public services you need a strong economy – but all they propose is higher taxes and more borrowing.'

Mr Alexander also attacked Labour for refusing to face up to dealing with the deficit now. 'You look at Labour, it's Miliband Mañana on the deficit.

'That's no good idea, because people would lose confidence in the United Kingdom as a place to do business.

'Then you have these ridiculous things like this energy price freeze which by the way is an energy price rise actually.

You look at Labour, it's Miliband Mañana on the deficit

'They would have frozen prices at the level they were, and energy companies thinking what is going to happen in the next parliament are going to be more reluctant to cut their prices now than they otherwise would be because they are worried about this.'

Chris Leslie, Labour's shadow chief secretary to the Treasury, said: 'Nobody will fall for this desperate attempt by Danny Alexander to distance himself from the government he and the Lib Dems are part of.

'For five years he and the Lib Dems have backed George Osborne every step of the way, including breaking their promises on tuition fees and VAT while cutting taxes for millionaires.

'And he's still doing it. As the head of the OBR has revealed, Danny Alexander and Nick Clegg 'signed off' the spending plans in George Osborne's Autumn Statement which would take public spending back to a share of GDP last seen in the 1930s.

'This extreme and ideological approach would put our vital public services at risk. It is in contrast to Labour's plans to save the NHS while getting the deficit down in a fair and balanced way.

'Danny Alexander cannot run away from the Lib Dems' record by trying to pretend that this government's policies are nothing to do with him.'

Build 300,000 more homes a year to halt 'massive' price rises

Britain needs an extra 300,000 homes to be built every year to stop 'massive' double-digit house price rises, the Lib Dems warn.

Danny Alexander said the state will need to order and build thousands of houses to meet the target to ensure 'rapid rises' become a thing of the past.

The economic recovery has been coupled with huge rises in house prices, up 10 per cent year-on-year across the UK.

The Chief Secretary to the Treasury said: 'There is a long standing problem in this country which is we don't build enough houses to meet the basic needs of our society.

'And what we've said is we think that as a country consistently we have to build around 300,000 houses a year over a number of years in order to start to have a housing supply that meets the demand.

'That doesn't stop house prices rising, but what it does it do is it moderates those rapid rises that we see which come from the fact that in some parts of the country demand massively outstrips supply and that pushes prices up.

'With a proper consistent supply of new housing what you wouldn't see is the housing market amplifying economic problems.

'Massive rises when the economy is going up, big crashes when the economy slows.'

UK house prices increased by 10 per cent in the year to November 2014, down only slightly from 10.4 per cent in the year to October

He refused to set a target for annual house price rises, adding: 'What I'm saying is that with a proper supply of housing, you can a housing system that's able to meet all the needs.

'Whereas at the moment it's just increasingly going in some parts of the country, especially in London and the South East but in some other places too, just beyond the reach of a lot of ordinary folk who are working hard on lower incomes.'

UK house prices increased by 10 per cent in the year to November 2014, down only slightly from 10.4 per cent in the year to October.

Massive rises when the economy is going up, big crashes when the economy slows

The average price in London was up 15.3 per cent, the East 11.9 per cent and the South East 10.8 per cent.

But even outside London and the South East, UK house prices increased by 7.1 per cent.

Mr Alexander warned foreign buyers were driving up prices by snapping up dozens of properties, not just in London but other major cities too.

'There is a degree of speculation in the sense that there are investors from overseas who buy sometimes dozens of houses.

'I was hearing the other day this isn't just a problem in central London now we are seeing this happening in Birmingham, in Manchester, in Liverpool as well. And so that's driving up prices unfairly.'

He is drawing up plans for further changes to the tax system to deal with the problem.

The government also needs to do more to free up land for development, he said.

'It's the state getting much more directly involved in making sure we have enough houses. This is the sort of dramatic shift that we need to make sure we get the number of houses we need.

'We should be able to deal with those things much more quickly.

'And so I think actually a big part of it is get this land out of the governments land and into the hands of people who can build houses on it.'

'Scotland has dodged a bullet': Collapse in oil price after independence would have meant sacking doctors and nurses

The collapse in the price of oil would mean an independent Scotland would now be sacking doctors, nurses and teachers, Danny Alexander claimed.

The Chief Secretary to the Treasury said Scots had 'dodged a bullet' by rejecting independence in last year's referendum.

The Scottish government is now demanding tax cuts to bailout the oil industry, just four months after claiming that booming North Sea reserves would bankroll independence.

The oil industry has been plunged into crisis after the price of a barrel of Brent crude halved since June to around $48

The price of a barrel of Brent crude – the global benchmark – has more than halved since June to around $48 (£31.50). Experts predict it could fall as low as $31 (£20.44) by April.

Mr Alexander said: 'Talk about Scotland having dodged a bullet. If we had been independent we wouldn't just be worrying about a very serious situation in the North Sea, the Scottish government would be working out how many nurses and doctors and teachers it would have to make redundant because it would have run out of money for a lot of those things.

Talk about Scotland having dodged a bullet

'If we were independent right now the effect on Scotland's finances would be utterly catastrophic.

Last summer Westminster parties were accused of scaremongering by the SNP for warning an independent Scotland would be vulnerable to a drop in oil prices.

'As it turns out the things that we said were rather mild compared to what actually happened.

'There's still a lot of oil and gas there, we want to make sure we get it out. That's what I've always wanted.

'But it's only because of the strength and stability of the United Kingdom that we have the ability to make those decisions rather than an independent Scotland which wouldn't just be beset by serious problems in the North Sea but by a fiscal crisis as well.

'Because we are part of the United Kingdom we don't have to confront that.'

He warned the situation facing the oil and gas sector is 'serious' and further help will be offered in the Budget in March.'